26 February 2008 / by Joy Tibbs

While the Post Office has cut rates on several mortgage types, Nationwide has revealed that buyers will have to find a larger deposit if they want to take advantage of its best rates.

The Post Office has cut its three-year deal for the third time since it launched in September. Having been introduced at 6.09 per cent, the rate was reduced to 5.64 per cent in November, 5.48 per cent in January and has now dropped to 5.34 per cent. The fee is just £399.

"People who are looking to get on the property ladder or who are coming to the end of a fixed rate deal, face either high arrangement fees or SVRs. Our three year deal offers a low-cost product that guarantees customers peace of mind with one of the lowest fixed rates on the market, coupled with a low arrangement fee," says director of lending Gary Fitton.

The rate compares favourably with both Halifax's and Nationwide's equivalent deals. The three-year Halifax rate is 5.75 per cent with a £999 fee, while Nationwide is offering 6.45 per cent with a £499 charge. Furthermore, the Post Office has cut its three-year fixed buy-to-let and self-certification mortgage rates from 5.99 to 5.79 per cent.

Prospective Nationwide customers must also come to terms with the fact that they will have to scrape together more substantial deposits if they are to take advantage of the building society's most competitive rates. The move is particularly bad news for first-time buyers and recent home buyers who will not have seen much growth in the value of their home.

The company has decreased the maximum loan-to-value (LTV) ratio on fixed-rate and tracker mortgages from 90 per cent of the property value to 75 per cent and has attributed the decision to higher funding costs and a "cooling housing market".

While a buyer taking out a two-year fixed-rate loan with a £499 arrangement fee borrowing 75 per cent of the property value will qualify for a rate of 5.85 per cent, those borrowing between 75 per cent and 90 per cent will have to pay 6.05 per cent. Those borrowing more than 95 per cent will pay 6.45 per cent.